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Small businesses must hurry to take advantage of tax breaks on IT equipment before the incentive is withdrawn next week, according to Microsoft.

In last Wednesday's Budget, chancellor Gordon Brown announced that the ICT tax allowance for small firms will end on 31 March.

The tax break allows entrepreneurs to claim 100 per cent first year allowances on investments in ICT, allowing them to write off capital expenditure against profits for tax purposes, whereas larger companies are required to write them off at the rate of 25 per cent per year.

Although many small firms were initially unaware of the tax break, it was welcomed by business groups for making it easier for entrepreneurs to invest in costly IT equipment.

Microsoft said that small businesses must now hurry if they are to take advantage of the tax break before it expires next week.

John Coulthard, head of small business at Microsoft, said that he was disappointed to see the government didn't extend the ICT capital allowance.

"Last year 40 per cent of small businesses claimed that they didn't feel they would be able to afford an IT upgrade. Gordon Brown's decision may therefore result in millions losing out on the competitive advantage of an effective IT system.

"Over the last year Microsoft has worked to promote this right to small businesses. During 2003, small businesses in Britain were planning to buy more than 3.5 million computers. With only one week left before this benefit is a thing of the past, they must grab this opportunity without forgetting that the ICT investments must map onto their business objectives and that the technology must support the business growth," he said.